Japan Unveils Plans to Bolster Financial Crisis Response System

By Takako Taniguchi and Shigeru Sato -
Jan 24, 2013

A Japanese regulatory panel unveiled
steps to improve how the country responds to a financial crisis,
by expanding potential support for securities firms, insurers
and small businesses during times of turmoil.

Brokerages and insurers would be allowed to receive
emergency capital from the state-run deposit insurance agency,
according to a proposal from the Financial Services Agency panel
released today in Tokyo. The group also recommended allowing
banks to take bigger stakes in small enterprises.

Japan is seeking to bolster preparedness for financial
crises after insurer American International Group Inc. (AIG) was
bailed out during the 2008 global market meltdown. Prime
Minister Shinzo Abe is also looking for ways to support small
businesses after relief on loan repayments expires in March.

“Uncertainty and instability persist in the global
financial market, and it is vital for Japan to rebuild a
stronger system and better protect depositors,” the panel said
in the report. “More funding to small local companies and wider
roles for banks to realize Japan’s economic growth are strongly
required.”

Policy makers plan to compile a bill to revise financial
laws based on the recommendations and send it to the Diet after
a Cabinet endorsement.

Under the plan, banks, which are prohibited from holding
more than a 5 percent stake in a small company, would be allowed
to own as much as 15 percent for 10 years in cases where the
holding would help revitalize the local economy.

Japan introduced the loan relief in December 2009 to stem
bankruptcies among small businesses by helping them defer
repayments to lenders. It extended the moratorium twice as the
record earthquake in March 2011 weakened the economy.